Alternative UCITS Luring More Interest

11 May 2010 (PLANSPONSOREurope.com) – Alternative and absolute return UCITS have garnered nearly $200 billion in assets, according to new research.

“The search for better performance and diversification is encouraging innovation in the fund industry, and leading to faster growth of alternative products, some of them unimaginable in a retail context just a decade ago”, says Jag Alexeyev, Head of Global Research at Strategic Insight, an Asset International company.

According to the firm’s Simfund database, investors across the globe have channeled nearly $200 billion of assets into more than 1,000 alternative and absolute return UCITS funds.  Based in Europe, UCITS (Undertakings for Collective Investment in Transferable Securities) funds are sold cross-border internationally, with rising commitments from Asia, Latin America, and other emerging regions, as well as from institutional investors in the United States.  UCITS are a set of European Union (EU) directives that aim to allow collective investment schemes to operate freely throughout the EU on the basis of a single authorisation from one member state.

“Several alternative UCITS have been quite successful, raising billions of dollars in assets while delivering uncorrelated returns with lower volatility”, adds Alexeyev. According to a press release, many of the winners are traditional fund companies that managed to expand their investment capabilities. A few products are highly innovative, for example, exchange traded funds offering hedge fund exposure linked to a managed account platform.

Hedge firms offering regulated “Newcits” funds represent rising competition, but many of them have yet to show meaningful gains, according to the report.  New research from Strategic Insight, released this week in their Managing Investment Fund Innovation book, claims that nearly 75% of alternative and absolute return UCITS so far have raised less than $100 million each.

Concerns by wealth advisors and distributors about risks, performance tradeoffs, fees, and service levels have been among the challenges, according to the report, which notes that as comfort levels increase and track records get established, alternatives “will become hard to ignore” in the industry.

Strategic Insight’s book is available at www.strategicinsightglobal.com/innovation .

Strategic Insight is a research firm for the fund and wealth management industry, providing clients with in-depth industry data, research reports, and executive consulting services for product, distribution and business strategy decisions. Strategic Insight assists over 250 firms worldwide, and its Simfund databases and analytical platforms cover more than 70,000 funds.

PLANSPONSOREurope Staff
editors@plansponsoreurope.com